Our Defined Benefit Division has a unique structure
Employers generally contribute a fixed rate of at least 14% of members’ salary to the defined benefit. Unlike traditional defined benefit schemes, ours has never been underwritten by employers. Our Trustee has never had the right to require employers to make extra contributions to the DBD in the event of a shortfall.
Instead, we have a process for the Trustee Board to manage the DBD’s financial position, including a mechanism, known as Clause 34, to reduce benefits if necessary.
About Clause 34 and monitoring periods
UniSuper is governed by the Trust Deed, which sets out rules and processes which we must adhere to.
Under Clause 34 of the Trust Deed, if the Actuary’s investigation report indicates that the actuarial measures have fallen, or are likely to fall, below particular levels, a 4-year monitoring period is triggered. If this happens, we must notify members of the DBD and employers.
A monitoring period is triggered if:
- the Accrued Benefits Index (ABI) is less than 100%, or
- the Vested Benefits Index (VBI) is less than 95%, or
- the level of contributions to UniSuper mean it’s likely that either of the above measures (or both) falls below those levels.
At the end of the monitoring period, if the Actuary’s investigation report indicates that the actuarial measures of the DBD have not improved enough, our Trustee Board must consider whether it is in the interests of DBD members as a whole (including pensioners receiving Defined Benefit Indexed Pensions) to reduce benefits payable.
If benefit reductions are required, the Board must do so on a fair and equitable basis.
We’ve had 4 monitoring periods since 2008
These occurred in 2008, 2011, 2012 and 2013.
The monitoring period triggered in 2008 and ending on 31 December 2012 saw the UniSuper Board consider benefit reductions. Based on the results of the actuarial investigation as at 1 January 2013, the Board considered whether it is in the interests of DBD members to reduce benefits payable. On 5 August 2013, they announced their decision:
- For future benefits accruing on and after 1 January 2015, the Benefit Salary used in the calculation of defined benefits will be based on the member’s annual equivalent full-time salaries averaged over the past five years of employment (instead of three) and past salaries used in the averaging calculation will no longer be indexed by Consumer Price Index (CPI) to the date of the Benefit Salary calculation.
- Benefits that DBD members have accrued (and would have accrued) before 1 January 2015 will not be altered
The DBD recovered sufficiently and no further action was needed for the monitoring periods:
- 30 June 2011 - 30 June 2015
- 30 June 2012 - 30 June 2016
- 30 June 2013 - 30 June 2017